STI: +0.43% to 3181.5                          KLCI: +0.02% to 1769
JCI: +0.69% to 4345.9                          SET: +1.81% to 1408.2
HSI: -1.50% to 22859                            HSCEI: -1.70% to 10316
Nifty: +0.78% to 5780.1                        ASX200: -0.23% to 5206.8
Nikkei: +0.20% to 14484.7                   S&P500: +0.66% to 1692.6
      
MARKET OUTLOOK:
By Joshua Tan, Head of Research

Macro Data

USA: The Institute for Supply Management’s index rose to 56.2, the strongest since April 2011, from 55.7 a month earlier. Readings above 50 indicate growth. The median forecast in a Bloomberg survey of economists was 55.

Eurozone: Market’s Manufacturing Purchasing Managers' Index (PMI) dipped to 51.1 last month from August's 26-month high of 51.4, in line with an earlier flash estimate.
The Eurozone unemployment rate was 12 per cent in August, unchanged from the previous month and down modestly from the 12.1 per cent peak recorded in the summer. In total, the number of unemployed dipped by 5,000 to 19.18 million.

Japan's 3Q Tankan Large All Industry Capex declines to 5.1% vs 5.5%.
Japan's August Job-to-applicant ratio was 0.95 (vs. expected 0.95)

Australia: The Reserve Bank of Australia has left the cash rate unchanged at a record low of 2.5%, saying the current setting of monetary policy remains appropriate. The decision was widely expected, with all 13 economists surveyed by AAP last week forecasting that the RBA would leave the cash rate on hold. Retail sales climbed 0.4 percent to A$21.9 billion ($20.4 billion) from a month earlier, when they rose 0.1 percent. The result compares with the median forecast in a Bloomberg News survey of 22 economists for a 0.3 percent gain.

South Korea: Korea National Statistical Office said that South Korean CPI rose to 0.2%, from 0.3% in the preceding month. Analysts had expected South Korean CPI to rise 0.5% last month.

China: The official manufacturing PMI edged up marginally to 51.1 in September as compared to 51 in the previous month. Despite the stabilization of overall manufacturing, development is deemed as imbalance as the official PMI is weighted towards larger, state-owned companies than the HSBC’s. “The trend towards improvement for large and medium companies is consolidating, but small companies face difficulties,” said Zhao Qinghe, senior statistician at the National Bureau of Statistics. The statement acknowledged that small firms are struggling in the face of overcapacity and weak demand, which fanned concerns that the green shoots of recovery may be at risk.

India: The HSBC Manufacturing PMI inches up to 49.6 in September from 48.5 in August. Manufacturing activity continues to shrink for a second month, albeit not as sharply as in August. “Orders flows remain weak, especially export orders, and employment fell,” said Leif Eskesen, chief economist for India at survey sponsor HSBC.

Indonesia: Annual inflation rate eased to 8.40% in September from August’s 8.79%, as Bank Indonesia tighten monetary policy by raising its key rate to 7.0% in August and later to 7.25% in September. Consumer price index declined 0.35% on monthly term as food price and transportation costs dropped. Central Statistics Agency reported a trade surplus of $132.4 million in August, a huge jump from a record $2.31 billion deficit in July. However, exports and imports were weaker on y-o-y basis, logging a decline of 6.31% and 5.69% respectively.

Thailand: Inflation rate continues to slow for the two consecutive months as food prices fell in September. The consumer price index rose 1.42% in September after marking an annual inflation rate of 1.59% in August. Inflation target for 2013 is revised downward to a range of 2.1-2.6% from the earlier 2.8%, as government expects of a slight fall in oil prices, a stronger baht, and the its efforts to reduce the cost of living, Commerce Ministry Permanent Secretary Srirat Rastapana said.
 

Regional Market Focus

Singapore

• The benchmark STI closed higher at 3,181.50 (+0.43%). The 3.7bn shares traded were worth S$1.1n in value.
• The FTSE ST Mid Cap Index gained +0.78% while the FTSE ST Small Cap Index declined -0.13%. The top active stocks were SingTel (+1.34%), GLP (+2.08%), Keppel Corp (-0.48%), Blumont (-0.41%), and UOB (+0.73%).
• The STI may end higher today, as markets expect economic effects from the partial US government shutdown to be limited. The global economy growth remains relatively positive. Key risk event ahead would be talks on raising the US debt ceiling.  
• We peg key near term support at 3,100 levels.
• Top Picks are DBS (Accumulate, TP: S$17.50), SingTel (Accumulate, TP: S$3.99) and Keppel Corp (Accumulate, TP: S$12.25). Deep Value Plays are Amara (Buy, TP: S$0.74), Boustead (Buy, TP: S$1.94) and Courts (Buy, TP: S$1.14).

Thailand

• Thai stocks gained as much as 1.81% on Tue as expectations held that US lawmakers would finally pass spending bill though US Congress missed an Oct 1 deadline to agree on a bill that funds government operations, causing US federal agencies to be ordered to shut down. 
• The SET index looks set to extend its gains today but the upside may be more limited as the US government shutdown is unlikely to deal a heavy blow to the Thai economy. If the shutdown lasts for a few days, it is expected to shave only 0.1% off US fourth-quarter GDP. However, investors are still keeping an eye on the looming US debt ceiling deadline during the middle of this month
• Investors should watch out for the rising bouts of volatility throughout the month as US debt ceiling deadline looms and QE speculation may return to the market ahead of the US FOMC policy meeting by the end of this month. For short-term trading ideas, we advise investors to look for laggards with strong fundamentals. Today we expect a trading range of 1390-1420 points for the SET index.
• Resistance for the SET index is pegged at 1420-1440 points and support at 1380-1400 points. 

• The Jakarta Composite Index (JCI) climbed Tuesday (01/10), after a row of economic data showed better-than-expected trade balance and inflation. The composite index of Indonesian stocks rose 29.723 points, or 0.69%, to 4,345.899. Seven of the 9 major industry sectors advanced Tuesday, led by basic industry sector with 2.01%-rise, followed by infrastructure sector with 1.52%-gain, and consumer goods sector with 1.37%-advance. From the economic front, Indonesia posted a surprise trade surplus for August, its first in 5 months, giving some relief to the weakening Rupiah, but current account deficit will likely keep weighing on the currency this year. Trade surplus in August was USD 130 million, compared with a record USD 2.3 billion deficit the previous month. Inflation slowed last month as prices for food, transportation, communications and financial services declined, giving Bank Indonesia (BI) room to keep key interest rates steady. Consumer Price Index (CPI) climbed 8.40% in September year-on-year, down from the 8.79% increase in August. 132 shares rose and 105 shares declined Tuesday on the Indonesia Stock Exchange, where volume on the regular board totaled 3.09 billion shares worth IDR 3.63 trillion. Foreign investors’ transactions accumulated to a net sale of IDR 257.25 billion.
• Indonesian stocks will likely move higher today, as sentiments improved on optimism that the partial government shutdown in the US would be short-lived, and after a row of better-than-expected economic data released Tuesday (01/10) in Indonesia. We estimate that the Jakarta Composite Index (JCI) will trade higher today, with support and resistance at 4,281 and 4,412.

• The First trading day of October concluded on an adverse sentiment and the bourse witnessed yet another inactive trading session directing the benchmark ASPI to drown into the negative terrain. The bourse trended downwards falling to an intraday low of 5,777.50, however as at the closure the ASPI settled slightly higher at 5,780.83 losing 22.49 points or 0.39%. Following a similar pattern the S&P SL20 also closed within the negative territory at 3,210.89, losing 3.48 points or 0.11%. The turnover for the day was recorded as LKR 1.28Bn, indicating a gain of 70.76% against the previous trading day.  Under the sectorial round-up, Bank Finance & Insurance (BFI) sector topped the list providing LKR 616.10Mn, accounting to nearly half of the day’s total turnover.  Diversified Holdings (DIV) sector provided LKR 242.28Mn and stood next in line under the top subscriber list for the day. Additionally, the two sectors BFI and DIV collectively made account to nearly 70% of the aggregated turnover for the day. During the day, a total of 73.32Mn shares changed hands resulting in a dip of 2.27% against the previous trading day. Foreign investors appeared to be bullish during the day once again recording net foreign inflow of LKR 389.83Mn resulted by foreign buying of LKR 439.08Mn and selling of LKR 49.25Mn. This assisted the year to date net foreign inflow (LKR 20.33Bn) to surpass the LKR 20Bn mark for the first time during the year. The local FOREX market for the day closed with the USD selling at LKR 133.65/- and buying at LKR 130.30/-.

• The Australian share market on Tuesday fell in choppy trading, after the United States government partially closed down because Congress failed to agree upon a new budget. The benchmark S&P/ASX200 index dropped 12.1 points, or 0.23 per cent, to 5,206.8 points.
• Today (02/10/2013), the Australian market looks set to open higher following gains on international markets  amid hopes the partial US government shutdown will not seriously harm the economy and of a settlement to Italy's political crisis.
• In economic news on Wednesday, the Australian Bureau of Statistics is due to release international trade in goods and services, and building approvals figures, both for August. 
• No major equities news is expected.

• HSI declined 347 points or 1.5% to 22,859 and CEI lost 178 points or 1.7% to 10,316 in the last trading day of 3Q13. Trading volume remained low at HKD53.24 billion.
• HK market was weak weighed by weakness in U.S. market due to concern of fiscal cliff. HSI opened low at 22,946 (-260 points). On the macro economic front, HSBC China manufacturing PMI (Sep) came in at 50.2, much lower than the preliminary reading of 51.2, followed by deeper drop of HSI. For 3Q13, HSI climbed 2056 points or 9.9% on the back of positive China economic data.
• Financial sector led the indexes down; HSBC (5.HK) and AIA (1299.HK) lost 1.2% and 2% respectively. ICBC (1398.HK), China Life (2628.HK) and PICC P&C (2328.HK) dropped 2.3%, 2.2% and 2.6% respectively.
• Solar energy sector outperformed after State Bureau of Taxation introduced lower added-value tax to support the related firms. Hanergy Solar (566.HK), GCL-Poly Energy (3800.HK) and Comtec Solar (712.HK) gained 12%, 3.7% and 4.5% respectively.
• Power Assets (6.HK), the best-performed blue chip, climbed 2.6% after slip off of HK electricity arm announced.
• Technically, HSI dropped below 10-MA and 20-MA and refilled the bull gap spanning down to 22,957. We still expect near-term consolidation, but remain bullish in mid-term. The next resistance and support for HSI are 23,000 and 22,500 respectively.

Morning Note
Company Highlights

Yangzijiang Shipbuilding (Holdings) Ltd announced that following the corporate updates regarding new shipbuilding orders on 4th September 2013, the Group has succeeded to secure new shipbuilding orders of four 208,000DWT bulk carriers with options for two identical vessels. Furthermore, there are thirteen options consisting of five 82,000DWT bulk carriers, three 64,000DWT bulk carriers and five 10,000TEU containerships converted into effective orders in September 2013. The total contract value of the above-mentioned seventeen new effective orders is approximately US$871 million. The 17 new effective Contracts are scheduled for deliveries in years 2015 to 2016, and therefore will not have any significant impact on the earnings of the Group for the financial year ending 31 December 2013. (Closing Price: S$1.100, +0.457%)

Keppel FELS Limited, a wholly-owned subsidiary of Keppel Offshore & Marine, a wholly-owned company of Keppel Corporation Limited has secured a contract from an affiliate of Clearwater Capital Partners to build a pair of premium KFELS B Class jackup rigs. The total cost of the project is about US$440 million, which also includes owner furnished equipment and project management fees. The rigs are scheduled to be completed in 4Q 2015 and 1Q 2016. (Closing Price: S$10.370, -0.480%)

Yoma Strategic Holdings has, together with SPA and First Myanmar Investment Co., Ltd, signed a memorandum of understanding to jointly explore business opportunities in Myanmar with Mitsubishi Corporation, Japan’s largest general trading company. This non-exclusive MOU will deepen the parties’ existing business relationship and clear the way for potential joint opportunities in future. This MOU makes Yoma Strategic, SPA and FMI the preferred business partners of Mitsubishi Corporation as it invests further in Myanmar. The Japanese conglomerate will benefit by securing access to unrivalled local expertise in the rapidly developing country. Yoma Strategic already works with Mitsubishi Corporation and Mitsubishi Motors to operate Mitsubishi’s first after sales service centre in Yangon. SPA has also been the exclusive distributor of Mitsubishi elevators and escalators for the Myanmar market since 1998 and Mitsubishi Corporation has been supporting SPA since then. Yoma Strategic Holdings have also signed a MOU with Mitsubishi Corporation and Mitsubishi Estate to invest in the prestigious Landmark project (excluding the Peninsula Yangon) in Yangon, Myanmar’s capital.The Japanese companies will also be involved in the planning, design, construction and operation of the project, providing technical support through its extensive network of affiliated companies, all of which hold extensive track records in Japan and around the region. (Closing Price: S$0.785, +0.641%)

Source: PhillipCapital Research - 2 Oct 2013